OTT: The monster under the bed

editor's corner

Newsflash: European mobile operators are a bit freaked out about the whole OTT thing.

Actually, that's far from news. Anyone who attended this year's Mobile World Congress in Barcelona, Spain got an earful of comments from European carriers lamenting the rise of over-the-top service providers. The problem is, no matter how frustrating the rise of this new business model is, it keeps spreading, and at some point, it might be time to concede that "if you can't beat 'em, join 'em."

Apparently that's what U.S. operators have done to some degree. Germany-based tyntec, which bills itself as a "global mobile interaction service provider," released findings from a survey that showed 100 percent of U.S. mobile operators already partner with OTT service providers. Not surprisingly, only 18 percent of European operators have struck up OTT collaborations.

But European operators may have good reason to fear the OTT service providers. The survey, which was conducted by consultancy mobileSquared, also revealed that 25 percent of European operators have already experienced up to a 5 percent loss in revenue from OTT competition, whereas U.S. operators have yet to experience losses on operator messaging services or revenue because of OTT. Further, 79 percent of European operators believe that OTT clients on smartphones are a threat to traditional SMS and voice-based services.

There are lots of reasons for the differences between European and U.S. perspectives, but they can be explained in part because of flat rate SMS and voice plans in the United States, which make the savings from OTT service providers less compelling to customers than they are Europe.

Further, in the U.S. there are no or minimal interworking fees between operators for voice and SMS, but in Europe an SMS from one network to another costs the sending carrier around 6 cents, said Thorsten Trapp , co-founder and CTO of tyntec. Further, fixed line calls to mobiles in Europe result in healthy revenue streams from termination charges that go to the mobile operators, Trapp said.

He told me that because OTT players do not participate in these traditional European charging models, operators on the continent greatly fear any OTT impact on their financial ecosystem.

The mobileSquared study recommends that mobile operators consider providing customers with access to third-party OTT services or launch their own versions of OTT services, such as T-Mobile USA's Bobsled app or Telefonica's Tu Me app. According to the study, this will buy them time until the next step, which is deployment of RCS/RCS-e. That step will enable operators to enter direct competition with OTT providers.

However, Trapp cautions that RCS will be largely useless without widespread interoperability, especially in Europe. "There are so many countries, so many operators, and everybody needs to have a relationship over a hub or directly with one another," he said. "I do see the MMS nightmare repeating with RCS/RCS-e," he said, recalling how interoperability issues crimped the MMS vision.

"There are big operators in Germany that are not participating in IMS. They don't care about Joyn or RCS-e. E-Plus, which has a 30 percent market share in Germany, is actively saying we won't do it," said Trapp.

With interoperability among IMS-based mobile networks years down the road in Europe, Trapp thinks that leaves an opening for aggregators such as tyntec, which offer what one might describe as back doors to help Internet companies looking to expand into Europe with OTT-based service offerings. For example, the company's tt.One product provides mobile phone numbers that Internet companies can associate with social networking profiles, instant messaging accounts or VOIP IDs and connect these services to the mobile space.

That does sound easier than trying to work with an IMS API, which might or might not be available from every network. On the other hand, carriers that do implement RCS/RCS-3 over IMS could potentially build healthy revenue streams by opening up their networks to OTT partners via APIs. And operators and third parties around the world are getting increasingly used to supplying value-added services via telecom network APIs.

According to a recent report from Mind Commerce, 5 percent of all mobile applications today use telecom network APIs. The firm predicts the telecom network API market will account for nearly $75 billion in global revenues worldwide by 2016, with a compound

OTT is not going away, and as any operator will tell you, the best approach for dealing with this burgeoning world of off-net services is unclear. However, the one thing carriers should not do is bury their heads underneath the blankets and hope the scary monster just goes away.--Tammy

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